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Canceling the debt would do a world of good.

Poor countries' unpayable debts should be canceled during this Jubilee year, argues Jo Marie Griesgraber, so resources can be used to meet their own peoples' needs.

Christians will have to raise their voice on behalf of all the poor of the world, proposing the Jubilee as an appropriate time to give thought, among other things, to reducing substantially, if not canceling outright, the international debt that seriously threatens the future of many nations.

--Pope John Paul II, Tertio millennio adveniente

CANCEL THE DEBT OF POOR COUNTRIES? WHAT DOES such a complex economic issue have to do with so momentous a Christian celebration? The call for debt relief in the Jubilee year 2000 is inspired by the biblical Year of Jubilee. According to Leviticus 25, the Year of Jubilee, which was to be held every 50 years, was a time to free slaves, return land to its rightful owners, and to forgive debts--a time to reestablish justice and equity throughout Israel.

Today the suffering of almost 700 million of the world's poorest people is greatly increased because the majority of their countries' scarce resources are being diverted to debt repayment, with little left over for health care, education, nutrition, or development programs. That is why the U.S. and Latin American Catholic bishops, Archbishop Desmond Tutu, the World Council of Churches, and many other religious leaders have joined the pope in urging the cancellation of the crushing foreign debt of the poorest countries.

"How do you explain to a child that she doesn't have enough to eat because her country can't pay its debt?" asks Bread for the World in its current Offering of Letters campaign devoted to debt relief. According to one study, an estimated 3 million cases of malnutrition could be avoided if governments invested in human development rather than debt repayment.

Take Mozambique, for example. This country along the southeast coast of Africa has come out of a vicious civil war, largely instigated by the former apartheid government in South Africa. Its people survive on about $90 per person per year. Yet half the government's income goes to service the debt. Children don't eat, clinics don't have medicine, teachers have no books, yet the creditors must be paid.

Neighboring Zambia, which was once well off because of its copper mines, is now one of the poorest ($380 annual per capita income) and one of the most indebted ($720 per capita) countries. It is struggling with the added burden of one of the highest rates of AIDS. For most people there are no hospitals even to die in and certainly no high-priced cocktails of pills to prolong life.

In Zambia, the victims of the national debt burden are everywhere: AIDS orphans who care for younger siblings, women beaten by their unemployed husbands, and people who die at an increasingly earlier age--Zambia's average life expectancy has dropped to 40 years. Zambia is one of the sub-Saharan countries that, on average, spend four times as much on debt repayment as they do on health care.

MOST SEVERELY INDEBTED COUNTRIES ARE IN SUB-SAHARAN Africa, but the same scenes are replayed in Honduras and Nicaragua in this hemisphere. The civil wars of the 1970s and 1980s had finally ended and the reconstruction begun when Hurricane Mitch arrived to destroy 20, 30, or more years of infrastructure building.

According to United Nations figures, more than 10,000 people perished in the hurricane, and an estimated additional 10,000 are believed to be missing. Nearly 3 million people in the region were affected through the loss of their homes and livelihood. In 1997 Honduras and Nicaragua spent 30 percent and 52 percent, respectively, of their government revenue to service their foreign debt (almost $5 billion for Honduras and more than $6 billion for Nicaragua).

So where did this debt of the poorest countries come from? Beginning in the 1970s, their governments borrowed heavily from foreign banks, governments, and international organizations like the World Bank, the Inter-American Development Bank, and the International Monetary Fund. They were encouraged by creditors, especially commercial banks flush with newly invested oil monies resulting from the 1973 hike in oil prices.

Due to irresponsible practices of creditors as well as debtor governments, much of the borrowed money went directly into the pockets of corrupt rulers or financed weapons or white-elephant projects--factories that never produced or highways to the president's village. In other cases, after crops were planted, the prices for coffee or bananas collapsed.

Whether crops grew or leaders stole the money, it is the country's poor people who suffer the dire consequences as their bankrupt governments remain obliged to repay the loans--with interest. Because the loans were in hard currency (such as U.S. dollars or French francs), they could only be repaid in hard currency, earned from exports.

Worsening the situation, many old debts have ballooned dramatically because debtors failed to keep up with the payments: Overdue principal and interest plus late fines were heaped on top of the old principal. In fact, many poor countries have already repaid the original principal of their debts but are still left with mountains of unpayable debt from the interest.

All this leaves these countries on a treadmill: they borrow more money or receive fresh foreign aid to pay off old debts; they hire foreign consultants to revise the economy so they can produce more for exports to earn hard currency to service the debt; they go hat in hand to try to reschedule old debt and get more foreign aid and more access to foreign markets.

Is there an alternative? In the U.S., when a person or local government cannot pay its debts, a neutral judge steps in to protect the debtor and ensure an orderly repayment of as much debt as possible. The survival of the debtor is assured. For debtor countries, however, the interests of the creditors come first. The creditors band together and deal with each debtor country one at a time.

An international bankruptcy court should be set up to help debtor countries work out their problems in a humane way. Until then, the unpayable foreign debts of the poorest countries must be canceled so countries can use their resources to meet their peoples' own needs first.

OBVIOUSLY, CANCELING THE DEBT IS NO SILVER BULLET THAT will eliminate world poverty. However, it is an essential first step. Much will remain to be done, especially ensuring that the local government is answerable to its own people. Rich governments like the U.S. need to open their markets to the products these countries sell and need to provide added foreign aid as grants--not loans--to governments that are answerable to their own people.

Any money freed up from debt cancellation must serve the poor. This can happen if the process of spending the money is open so the local people can see what is going on and help direct it. Past corruption may go unpunished, but future corruption can be avoided through openness and the participation of local civic organizations.

And how much will this cost us? The total debt owed to the U.S. government by the so-called Highly Indebted Poor Countries is roughly $6.8 billion. The cost to the U.S. Treasury measured as loss of income from canceling the debt is almost nothing because the countries were paying the U.S. almost nothing.

That's right: Although roughly half of these countries' governments' entire budgets goes to paying the foreign debt, that is mainly debt owed to the international organizations. Some countries owe 100 percent--or even more--of their annual budget. Thus debts to donor governments often are not being repaid.

Canceling this debt is relatively cheap. It is possible. No, it will not wipe out world poverty, but world poverty cannot be eradicated without debt cancellation.

Even if the debt is cheap to cancel, why should U.S. citizens care about the unpayable foreign debt of poor and remote countries? The first answer is that the destitution of any person is degrading for all of us.

But in addition to that, it is also true that communicable diseases such as tuberculosis spread easily; wars over scarce resources mount; fragile environments are exploited for survival; poverty and wars trigger refugees and emigration. These are problems that refuse to be confined within the borders of impoverished and indebted nation states. These are global problems, they are our problems, and in our own self-interest--if not in the name of our common humanity or our Christian commitments--we must work together to resolve them.

And how does this relate to the great Year of Jubilee? Jesus announced the beginning of his ministry by quoting the prophet Isaiah: The blind would see, the lame would walk, the poor would have the Good News preached to them. Isaiah was describing a Year of Jubilee, a Year of the Lord--and Jesus described his entire ministry as a time of Jubilee in the tradition of Leviticus 25.

There are many arguments for not canceling the debts of the poorest countries: "They'll do it again.... It's too costly.... We'll lose our leverage over them.... It will reward dictators." There are a zillion reasons to avoid generosity, even justice. But we are anticipating a year of God's favor, and our God is ridiculously generous. God's gift to us was his own son. And the son taught us the foolish way of living and praying: "Forgive us our debts as we forgive our debtors."

Canceling the unpayable debts of the poorest countries is good policy. It is good accounting. But mostly, it is the right and generous thing to do. And then we should roll up our sleeves and continue the hard work of eradicating shameful poverty that debases our sisters and brothers--who are the face of Jesus--whether at home or in Zambia or Honduras or Kenya or Mozambique or Congo or Vietnam or Guyana.

Advance copies of Sounding Board are mailed to a sample of U.S. CATHOLIC subscribers. Their answers to questions about Sounding Board and a representative selection of their comments about the article as a whole appear in Feedback.

By JO MARIE GRIESGRABER, chair of the executive committee of the Jubilee 2000/USA Campaign and director of the Rethinking Bretton Woods Project at the Center of Concern in Washington, D.C.
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Title Annotation:poorest countries
Author:GRIESGRABER, JO MARIE
Publication:U.S. Catholic
Geographic Code:00WOR
Date:Oct 1, 1999
Words:1717
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